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Apple boosted its research and development spending by 33 percent in the second quarter of 2013 compared to the same period last year, according to a quarterly report filed with the Securities Exchange Commission. If the rate of spending continues, Apple could drop over $4 billion on R&D this fiscal year.

During the quarter ending March 30, 2013, Apple spent $1.119 billion on R&D, compared to $841 million from a year ago. In the first six months of its fiscal year, Apple has spent $2.129 billion total on R&D, while it spent only $1.599 billion last year.

Apple stated that the spending for the quarter was up 33 percent due to “an increase in headcount” and “expanded R&D activities.” The statement went on to say that the “focused investments” in R&D are “directly related to timely development of new and enhanced products that are central to the Company’s core business strategy. As such, the Company expects to make further investments in R&D to remain competitive.”

While the sheer amount of money Apple has spent on R&D is astronomical, the $2.129 billion spent over six months constitutes only 2 percent of the company’s net sales. Apple announced its earnings for the second quarter on Tuesday and showed that sales of Macs and iPods were down, iPhone growth had slowed significantly, and the only product category that continues to grow is the iPad. Apple CEO Tim Cook promised on the investors’ call that “really great stuff,” including hardware, software, and services, will be introduced "in the fall and across all of 2014.”

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Casey Johnston
Casey Johnston is the former Culture Editor at Ars Technica, and now does the occasional freelance story. She graduated from Columbia University with a degree in Applied Physics. Twitter@caseyjohnston

Hopefully people see that "supposedly" in there before thinking you're a troll and downvoting your post...

I agree, people seem to complain a lot that "Apple doesn't innovate anymore" yet with them increasing their R&D budget, that can't really be the case. It's just that we haven't been shown the fruits of their labour yet. Or people just don't notice the innovations, because it's a whole bunch of smaller things spread over a dozen different products rather than a couple really huge things in some amazing new product. "Innovate" doesn't necessarily mean creating the next big thing like a TV or watch, but all the little things like their new Macbook manufacturing processes, etc.

Points out that “innovation” (which customers see) and “invention” (which can lead to new technologies many years down the road) can be very different beasts.

Just as an FYI on this, number of patents filed and budget for R&D both have been correlated with companies' success. I don't recall that one is a dramatically better measure than the other; perhaps others can chip in. Either way, in most companies R&D is done with the intention of achieving higher profits down the road and I'll get on my hobby horse just long enough to note that if a firm can't capitalize on risky R&D it's unlikely to undertake it.

well i approve... if short-changing your new office "saucer" is required then good ahead...(even if i do think it is a bad idea, but on the other hand don't think the R&D department will be housed in the new "saucer")

...also i think HP used to spend 10% of their profits on R&D, not sure if in was net or gross profit.(back in the day before Agilent became the "test equipment" company that was HP)

I'm amazed they do what they do without a (relatively) huge R&D budget. I'm also surprised they haven't upped it sooner, given with the gradual crescendo over the years calling for better use of the war chest money. And given Apple's huge (albeit eroding) margins and free cash flow, the difference in R&D spending between them and others in the sector is probably even more pronounced when compared on a %-of-cash-flow or %-of-operating-margin basis.

well i approve... if short-changing your new office "saucer" is required then good ahead...(even if i do think it is a bad idea, but on the other hand don't think the R&D department will be housed in the new "saucer")

I bet it will.

The whole point of the "space ship" design is to promote inter-depertmental collaboration. As opposed to a tower, where you stay on your floor and ride an elevator past all others on your way to meeting, the large, broad saucer forces you to walk past offices of people you otherwise might not interact with or cross a common area in the center to get to meeting.

It's like a gigantic knights of the round table. And the more groups you isolate away from the table, the more ideas you isolate from discussion.

I think a donut-shaped building is terrible for bringing departments closer. The only reason I can think of for that design is the Infinite Loop street name, and that’s not much of a reason. Between that and Steve Job’s crazy construction demands, I think the project is a very poor use of money. (I work in the construction industry, and I fear they’re going to end up with a building that can’t handle thermal expansion without finishes cracking, and will be an echo chamber, acoustically speaking – neither are a sure thing but I see a lot of red flags.)

But then, Apple isn’t doing much else with its pool of cash, which confuses me. Restraint is admirable during times of profit, but not that much restraint.

Seems like they've done pretty well without a huge R&D budget, but it's good to see that increasing, I think they'll need it.

Interesting figures but I’d like to see how they compare to other device makers such as HP, Dell, Lenovo and especially Samsung. They seem closer than those listed above but still not directly comparable.

Apple benefits from the research that Intel, Google, Samsung (maybe not so much now) and MS undertake to some degree although not sure if that is reciprocated much!

well i approve... if short-changing your new office "saucer" is required then good ahead...(even if i do think it is a bad idea, but on the other hand don't think the R&D department will be housed in the new "saucer")

I bet it will.

The whole point of the "space ship" design is to promote inter-depertmental collaboration. As opposed to a tower, where you stay on your floor and ride an elevator past all others on your way to meeting, the large, broad saucer forces you to walk past offices of people you otherwise might not interact with or cross a common area in the center to get to meeting.

It's like a gigantic knights of the round table. And the more groups you isolate away from the table, the more ideas you isolate from discussion.

This is a good thought. One company I interviewed with had everybody in a single room with (relatively) sizeable cubicles. All the execs, and even the president sat in a cubicle. Although nightmarish for tasks requiring any amount of concentration, it was great for collaboration.

That sounds wonderful for security. Does the iOS development team really need the Payroll department walking past them every day?

What a terrible idea.

Many people have talked about the Pixar building's design as an important part of their company's functioning…bringing the creatives and tech types into frequent contact (rest room area; cafeteria,…) while still keeping team focus. Jobs was very proud of the arrangement as he was hopeful for the spaceship. Lots of ink spilled about how the design reflects Apple's way.

When she worked as an architect, my wife spent a LOT of time understanding how work actually got done in a given hospital, laboratory, courthouse, etc. Who had to meet with whom how frequently, what was confidential and what needed sharing, etc. I'm going to guess that since (a) it seems good organizations know about this stuff, and (b) supposedly Apple is extremely self-aware about having a unique organizational approach (no “divisions” that might compete), it might actually work out well. It certainly does matter. I wouldn't trust comments from somebody who's neither an architect nor a long-term employee, since they'd be imposing a bunch of suppositions that likely were irrelevant.

Research and development are two different activities. At least the way IBM did it and probably still does any engineer involved in the work of producing a product is considered part of development. For both IBM and Microsoft research is a totally different activity. At least for both of them, there was no simple relationship between spending money and results. My guess would be that Apple feeling the need to spend a large amount of money is probably a sign of a company that does not have much idea of what it plans to do. Successful products come from the meeting between an opportunity and a relatively small number of people that are capable of designing an exceptional product to meet that opportunity. Apple's biggest problem is the question of where the opportunity for their next big breakthrough is going to come from. But the more people they have working on it the less likely they are to produce exceptional results.

Seems like they've done pretty well without a huge R&D budget, but it's good to see that increasing, I think they'll need it.

Steve's Apple was a laser-focused organization.

No blue-sky R&D project there, and relatively very, very small teams working on items to ship.

Will this change? The effect goes significantly beyond the extra dollars out the door. The more people, more resources thrown at things, the easier is for management to become distracted. See: Microsoft.

It is a little unfair to slide Pharmaceutical companies in there. Not only are they pretty much just R&D companies, they also have extremely expensive R&D that requires big spending. Apple doesn't need to do multiple large scale double-blind trials just to be able to sell their product at all. Of course, neither does Microsoft.

Seems like they've done pretty well without a huge R&D budget, but it's good to see that increasing, I think they'll need it.

Interesting figures but I’d like to see how they compare to other device makers such as HP, Dell, Lenovo and especially Samsung. They seem closer than those listed above but still not directly comparable.

Apple benefits from the research that Intel, Google, Samsung (maybe not so much now) and MS undertake to some degree although not sure if that is reciprocated much!

OK, so Apple's R&D expenditures aren't that impressive because other companies spend more, but spending more means Apple doesn't know where it's heading and is throwing money at a problem that doesn't yield to (and is in fact made worse by) cash.

In the last 6 months they earned about 18 billion $. 500 million is less than 3% of that. So, no, I really wouldn't say it's a lot of money for them. It is pocket-change for Apple.

The criticism isn't that Apple "never innovates", it is that for a supposed "innovation center" they actually spend very little money on R&D. Microsoft, Google and Samsung each spend 2-4 times as much. And that is when you compare it in absolute numbers. When you compare it vs invested percentage of profit it is far less.

I'm amazed they do what they do without a (relatively) huge R&D budget. I'm also surprised they haven't upped it sooner, given with the gradual crescendo over the years calling for better use of the war chest money. And given Apple's huge (albeit eroding) margins and free cash flow, the difference in R&D spending between them and others in the sector is probably even more pronounced when compared on a %-of-cash-flow or %-of-operating-margin basis.

It's easy when other people's inventions are the foundation you build your innovations on. You get the benefit of their R&D. Apple's been kicked out of Samsung's labs though: something about an ongoing "nuclear war". It turns out Samsung invents an awful lot of stuff.

The more products you make, the more R&D you're going to need. Many of the companies with larger R&D budgets make more products than Apple, so naturally they'll need more R&D. And some are involved in R&D that requires huge sums of money for facilities e.g. Intel and foundries. Many comparisons are Apples and oranges really. It would be more useful to ask what sort of R&D it took to create and iterate the iMac, the iPod, the iPhone, the iPad, etc. and see how much Apple is then likely to need to maintain existing products and bring a new one to market.

That depends on the type of your products. If you develop a better CPU, RAM, Screen, etc. technology for mobile devices it doesn't matter if you use it in 1 mobile device or 10. You just need more QA testing with more products there. But that is not R&D.

You could argue that Samsung spends 3 times the R&D of Apple because they also make washing machines, microwaves and so on (but not because they make more smartphone variants) , but Google (2 times Apples R&D and 33% of their profit) and Microsoft (4 times, 66%) do not have their fingers in more pots than Apple does, so that argument does not apply to them.